Q:

Are interest rates dependant on credit scores when applying for auto loans or credit?

A:

Quick Answer

Interest rates for auto loans, credit cards and personal loans are directly related to the credit scores of consumers, reports About.com. Consumers with good credit scores receive better interest rates, while those with low credit scores tend to pay significantly more in interest.

Continue Reading

Full Answer

Although consumers with poor credit scores are able to secure loans to buy autos, higher interest rates cause their monthly payments to escalate, explains Bankrate. Those with bad credit scores end up paying much more for a car. Investing effort to boost a credit score before buying a car can make a significant difference in interest rates and monthly payments. Additionally, insurance companies offer better auto insurance premium rates to those with good credit scores because they typically file fewer claims than those with a lower scores, points out About.com.

Not only do financial institutions offer more advantageous interest rates for credit cards to consumers with good credit scores, but they also offer better rewards plans, special gifts and cash-back deals, according to U.S. News & World Report. Good credit scores encourage credit card companies to increase credit limits, which allows borrowers to further raise their credit scores. Those with good credit scores who apply for personal loans tend to get not only lower interest rates, but also higher credit lines and better repayment plans.

Learn more about Credit & Lending

Related Questions

Explore